Glossary of Credit Card Processing Terms

Lets look at various common credit card processing terms. As a merchant offering credit card payments, its imperative that you understand the lingo associated with the process.

Acquirer or Acquiring Bank – The institution or organization that processes credit cards payments for a merchant that accepts credit cards in return for goods and services.

Authentication – Identification of individuals and businesses through the use of digital certificates.

Authorization – The process, where it is checked if the amount of funds required for transaction, are available or not.

AVS – Address Verification System – The process where cardholders address is validated against the records of credit card issuer. The process helps in establishing the legitimacy of the cardholder and prevents fraud.

Account Number – A unique number assigned to the cardholder that serves as a unique identity.

Batch – A group of credit card transactions that have to be settled with the merchants acquiring financial institution.

Card Not Present – When the card is not present during the transaction like in case of mail order, it is termed as Card not present transaction.

Card Present Account – A transaction where the consumer and the card are required to be present at the same location.

Cardholder – The person who holds the credit card or a business enterprise who is eligible to make a payment by card.

Corporate Card – A Card held by a business unit and is used for covering work related expenses.

Chargeback – Charge back occurs when the credit card holder requests to debit the amount from Merchant account.This mainly occurs when the cardholder is not satisfied with the quality of product/service or on the occurrence of fraud.

Charge back Fees – Are the fees levied in the event of charge back.

Debit Card – Card, which withdraws payments directly from holders banking account to pay the merchant.

Discount Rate – Rates set by a Merchant Bank for offering services. This rate is arrived by taking into consideration the charges of number of factors.

Encryption – The process where data is scrambled and unscrambled when sent over the Internet.

Gateway – An application that accepts order transactions from merchants and sends them.

Interchange – A system managed by Master and Visa to bring global standard in exchanging data and money between banks.

Late Settlement – Fees paid by merchant for late processing of settlement

Third Party Processor – Companies that enter into third party agreements with Issuer and acquirer banks to process settlements.

Transaction – Refers to the purchase or transfer of money through credit card. Transactions are either offline or online in nature, Offline transactions are those that happen at physical establishments.

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